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(Volcker 2.0 –Prop) Final Volcker Rule Amended Regulations September 11, 2019 with updates for co vered fund provisions July 14, 2020

FLOWCHARTS: PROP TRADING Final Volcker Rule Amended Regulations (Volcker 2.0 – Prop): Proprietary Trading September 11, 2019 with updates for www.volckerrule.com covered fund provisions July 14, 2020

The Volcker Rule was enacted in 2010, as part of the Dodd-Frank Act, as Section The Agencies amended the regulations relating primarily to the covered funds 13 of the Bank Holding Company Act of 1956. The original regulations portion of the Volcker Rule in 2020 (2020 Final Rule). The 2020 Final Rule also implementing the Volcker Rule were adopted by the five Volcker Rule agencies— made certain changes to the proprietary trading portion of the Volcker Rule related the Federal Reserve, FDIC, OCC, SEC and CFTC (Agencies)—in 2013 (2013 to activities of and compliance program obligations on qualifying foreign excluded Final Rule). The Economic Growth, Regulatory Relief, and Consumer Protection funds. Act amended the Volcker Rule in 2018 to exempt small banking entities that are These Davis Polk flowcharts are designed to assist firms in determining whether not significantly engaged in trading activities, and regulations were adopted to they are banking entities subject to the Volcker Rule and its implementing implement those amendments in 2019. The Agencies amended the regulations regulations and, if so, to assist those banking entities in identifying permissible and relating primarily to the proprietary trading portion of the Volcker Rule in 2019 impermissible proprietary trading activities under the Volcker Rule’s implementing (2019 Final Rule). regulations. Davis Polk’s covered funds flowcharts are available at www.volckerrule.com

Step IS THE BANKING ENTITY ENGAGED IN PROPRIETARY TRADING UNDER Step IS THE ACTIVITY PRECLUDED BY A BACKSTOP PROVISION? 18 1 THE VOLCKER RULE? 3

IS THERE A BANKING ENTITY INVOLVED? 2 DOES THE ACTIVITY OR TRANSACTION INVOLVE A PURCHASE OR SALE BY THE BANKING ENTITY OF ONE OR MORE FINANCIAL INSTRUMENTS? 3 PROPRIETARY TRADING COMPLIANCE REQUIREMENTS OVERVIEW IS THE BANKING ENTITY TRADING AS PRINCIPAL FOR A TRADING ACCOUNT? 4 IS AN EXCLUSION FROM PROPRIETARY TRADING AVAILABLE? 5 – 6 THE 3 TIERS 20 VARIED COMPLIANCE REQUIREMENTS BASED ON TAL 21 SIX PILLAR COMPLIANCE PROGRAM 22 Step IS THE PROPRIETARY TRADING PERMITTED UNDER THE SUMMARY OF PROPRIETARY TRADING METRICS 23 - 24 2 VOLCKER RULE? PERMITTED ACTIVITY-SPECIFIC COMPLIANCE PROGRAM ELEMENTS 25

DAVIS POLK CONTACTS 26 MARKET MAKING AND UNDERWRITING 7 – 10 RISK-MITIGATING HEDGING ACTIVITIES 11 US GOVERNMENT OBLIGATIONS 12 FOREIGN GOVERNMENT OBLIGATIONS 13 ON BEHALF OF CUSTOMERS 14 REGULATED INSURANCE COMPANIES 15 TRADING ACTIVITIES OF FOREIGN BANKING ENTITIES OUTSIDE THE UNITED STATES 16 QUALIFYING FOREIGN EXCLUDED FUNDS 17

IS A BANKING ENTITY ENGAGED IN PROPRIETARY TRADING ACTIVITY IS NOT UNDER THE VOLCKER RULE? PROPRIETARY TRADING Step .Is there a banking entity involved? AND IS NOT WITHIN THE SCOPE OF THE VOLCKER .Does the activity or transaction involve a purchase or sale by the banking RULE 1 entity of one or more financial instruments? .Is the entity trading as principal for a trading account? SLIDES 2 TO 6 .Is an exclusion from proprietary trading available? NO (OR IF AN EXCLUSION IS AVAILABLE) YES (OR IF NO EXCLUSION IS AVAILABLE)

NO IS THE PROPRIETARY TRADING PERMITTED UNDER THE VOLCKER RULE? .Market Making and Underwriting .Trading on Behalf of Customers Activities Step .Trading by a Regulated Insurance .Risk-Mitigating Hedging Activities Company .Trading in US Government 2 .Trading Activities of Foreign Banking Obligations ACTIVITY IS Entities Outside the United States IMPERMISSIBLE .Trading in Foreign Government SLIDES 7 TO 17 .Qualifying Foreign Excluded Funds PROPRIETARY TRADING Obligations

YES

YES IS THE ACTIVITY PRECLUDED BY A BACKSTOP PROHIBITION? Does the activity: Step .Involve or result in a material conflict of interest between the banking Tiered compliance program entity and its clients, customers or counterparties? requirements apply for Significant TAL 3 NO and Moderate TAL Banking Entities. .Result in a material exposure by the banking entity to high-risk assets Significant TAL Banking Entities must also report metrics. SLIDE 18 or trading strategies? .Pose a threat to the safety and soundness of the banking entity or U.S. financial stability? SLIDES 20 TO 25

ACTIVITY IS PERMITTED PROPRIETARY TRADING

Is the Is There a Banking Entity Involved? entity:

An insured depository institution (IDI) excluded from the application of the Volcker Rule because it is relatively small and engaged in relatively limited trading activities YES (an excluded small bank)?

An IDI is an excluded small bank if it, and every Does the IDI function solely in a trust or fiduciary capacity (a non-depository company that controls it, has: trust company) and is not affiliated with an IDI (other than an excluded small • Total consolidated assets of $10 billion or less; and bank or non-depository trust company)? • Trading assets and liabilities (TAL), on a consolidated basis, that are less than 5% of its total . Substantially all of its deposits are in trust funds and are received in a bona fide fiduciary consolidated assets. capacity . None of its insured deposits are offered or marketed by or through an affiliate of the NO institution YES . The IDI does not: . Accept demand deposits or deposits that can be withdrawn by check or similar An IDI other than an excluded small bank? means for payment to third parties or others, or make commercial loans . Obtain payment or payment-related services from any Federal Reserve Bank NO . Exercise Federal Reserve discount or borrowing privileges

A company (e.g., a bank holding company) that controls an IDI (other than an excluded small bank or non- NO YES depository trust company)? YES Entity is a banking entity. NO ENTITY IS NOT A BANKING ENTITY Go to next page. AND IS NOT SUBJECT TO THE VOLCKER RULE

A company that is treated as a bank holding company YES for purposes of Section 8 of the International Banking Act? NO YES

. A foreign bank with a U.S. branch, agency or U.S. subsidiary commercial lending company Is the affiliate or subsidiary: . A parent company of such foreign bank . A covered fund that is not itself a banking entity under any of the previous questions? . A portfolio company held under the merchant banking or insurance NO company investment authorities of section 4(k) of the BHC Act, or any portfolio concern controlled by an SBIC, in each case, that is not itself a An affiliate or subsidiary, as defined in the Bank Holding YES banking entity under any of the previous questions? Company Act, of any of the above (other than an . The FDIC acting in its corporate capacity or as conservator or receiver? excluded small bank)? NO VOLCKER RULE 2.0 – PROP © 2020 Davis Polk & Wardwell LLP. All rights reserved. This presentation is not a full analysis of the matters presented and should not be relied upon as legal advice. volckerrule.com 2 Step 1B: Does the Activity or Transaction Involve a Purchase or Sale by the Banking Entity of One or More Financial Instruments? Is the banking entity purchasing or selling* as principal one or more of the following?

INCLUDED IN THE DEFINITION OF FINANCIAL INSTRUMENT: SECURITIES, DERIVATIVES, FUTURES

EXCLUDED FROM THE DEFINITION OF Securities FINANCIAL INSTRUMENT As defined in section 3(a)(10) of the Securities Exchange Act including an option on a security

Loan Derivatives Includes: Any loan, lease, extension of credit, or • Swaps and security-based swaps secured or unsecured receivable that is • Physical commodity forwards Trade is a not a security or derivative • Foreign exchange swaps and foreign exchange forwards purchase or sale • Retail foreign exchange and retail commodity transactions of a financial NO YES • An option on any of the above instrument. Go to next page. Commodity Does not include: • Any consumer, commercial or other agreement, contract or transaction that has been 3 A commodity, except one that is: jointly determined by the SEC and CFTC not to be a swap or security-based swap • Any identified banking product under the Legal Certainty for Banking Products Act • An excluded commodity (i.e., of 2000 financial commodities), other than foreign exchange or currency • A futures contract or option on a Futures contracts and options on futures contracts futures contract • A derivative

* For derivatives, “purchase” and “sale” include the Foreign exchange or NO execution, termination (prior to scheduled maturity), currency assignment, exchange or similar transfer/conveyance of, or extinguishing of rights or obligations under, a derivative.

YES ACTIVITY IS NOT PROPRIETARY TRADING AND IS NOT WITHIN THE SCOPE OF THE VOLCKER RULE

VOLCKER RULE 2.0 – PROP © 2020 Davis Polk & Wardwell LLP. All rights reserved. This presentation is not a full analysis of the matters presented and should not be relied upon as legal advice. volckerrule.com 3 Step 1C: Is the Banking Entity Trading as Principal for a Trading Account? *Account does not refer to an account in the normal business or accounting sense. The preamble notes that trading Are account is nomenclature for the set of transactions that are subject to the the following MARKET RISK CAPITAL (MRC) TEST restrictions on proprietary trading. tests satisfied? Is the banking entity, or any affiliate of the banking entity, an insured depository institution, a bank holding company or a savings and loan company that calculates risk-based DEALER TEST capital ratios under the U.S. banking agencies’ market risk capital rule? Regardless of purpose, does the banking entity meet either of the following descriptions? OR SHORT-TERM INTENT TEST . The banking entity is licensed or registered to If the banking entity does not calculate risk-based capital engage in the business of a dealer, a swap dealer, ratios under the U.S. market risk capital rule, has the or a security-based swap dealer (or required to Is the account* used to purchase or sell one or banking entity made an election to assess its trading be). more financial instruments principally for the account as if it were subject to the U.S. market risk capital . The banking entity engages in the business of a purpose of any of the following? rule? dealer, swap dealer or security-based swap dealer outside of the United States. . Short-term resale . Benefitting from actual or expected short- A banking entity must apply this election AND term price movements . Realizing short-term arbitrage profits NO** consistently across itself and all of its wholly- owned subsidiaries. The financial instrument is purchased or sold in . Hedging one or more such positions connection with the activities that require the banking entity to be licensed/registered as a dealer or are in A purchase or sale of a financial instrument will YES connection with the activities of such business outside the be presumed not to be for a trading account if United States, as relevant. the banking entity: . holds the instrument for 60 days or Is the account used to purchase or sell financial longer, and instruments that are both covered positions and trading . does not substantially transfer its risk positions (or hedges of such covered positions) under the within 60 days. U.S. market risk capital rule?

**If a banking entity is or elects to be subject to the MRC Test, then it is not subject to the Short-Term Intent Test.

*See slide 6 for further details.

Entity is trading as ACTIVITY IS NOT principal for a trading PROPRIETARY TRADING account. Go to the next AND IS NOT WITHIN THE YES TO ANY APPLICABLE NO TO ALL APPLICABLE TESTS page. SCOPE OF THE VOLCKER TEST RULE VOLCKER RULE 2.0 – PROP © 2020 Davis Polk & Wardwell LLP. All rights reserved. This presentation is not a full analysis of the matters presented and should not be relied upon as legal advice. volckerrule.com 4 Step 1D-1: Is an Exclusion from Proprietary Trading Available?

REPO AND REVERSE REPO Does the Repo or reverse repo pursuant to which the banking entity has simultaneously agreed, in purchase or sale writing, to both purchase and sell a stated asset, at a stated price and on stated dates or on meet any of the demand with the same counterparty. following criteria?

SECURITIES LENDING ACTIVITY IS NOT PROPRIETARY Securities lending transaction in which the banking entity lends or borrows a security YES TO ANY TRADING AND IS temporarily to or from another party pursuant to a written securities lending agreement under QUESTION NOT WITHIN THE which the lender retains the economic interests of an owner of such security, and has the SCOPE OF THE right to terminate the transaction and to recall the loaned security on terms agreed by the VOLCKER RULE parties.

LIQUIDITY MANAGEMENT PLAN Is the banking entity trading in Purchase or sale of a security, deliverable foreign exchange forward, deliverable foreign accordance with a documented exchange swap or cross-currency swap for the purpose of liquidity management in liquidity management plan that accordance with a documented liquidity management plan of the banking entity. meets specified requirements?

DCO/CLEARING AGENCY TRANSACTIONS Go to the next Made by a banking entity that is a derivatives clearing organization or a clearing agency in page. connection with clearing financial instruments. These circumstances include any purchase or sale:

. necessary to correct trading errors made by or on behalf of a customer; LIMITED CLEARING MEMBER ACTIVITIES . in connection with and related to the Made by a banking entity that is a member of a clearing agency, derivatives clearing management of a default or threatened organization or designated financial market utility, in specified circumstances. imminent default of a customer; . in connection with and related to the NO TO ALL QUESTIONS management of a default or threatened default SATISFY AN EXISTING DELIVERY OR LEGAL OBLIGATION of the clearinghouse or financial market utility; . in connection with and related to the Made by a banking entity to satisfy: management of a default or threatened default . an existing delivery obligation of the banking entity or its customers, including to of another member of the clearinghouse or prevent or close out a failure to deliver. financial market utility; or . an obligation of the banking entity in connection with a judicial, administrative, self- . required by the rules of the clearinghouse or regulatory organization or arbitration proceeding. financial market utility to mitigate the risk resulting from the clearing by a member of security-based swaps that reference the member or an affiliate of the member.

Does the ACTING AS AGENT, BROKER OR CUSTODIAN purchase or sale Made by the banking entity acting solely as agent, broker or custodian. meet any of the following criteria? EMPLOYEE COMPENSATION PLANS Made through a deferred compensation, stock-bonus, profit-sharing or pension plan of ACTIVITY IS NOT the banking entity that is established in accordance with the law of the United States or a PROPRIETARY foreign sovereign, if the purchase or sale is made directly or indirectly by the banking entity as YES TO ANY QUESTION TRADING AND IS trustee for the benefit of persons who are or were employees of the banking entity. NOT WITHIN THE SCOPE OF THE DEBT PREVIOUSLY CONTRACTED VOLCKER RULE Made in the ordinary course of collecting a debt previously contracted in good faith, provided that the banking entity divests the financial instrument as soon as practicable, and does not retain such investment for longer than the period permitted by its primary regulatory agency.

ERROR TRADES The trading Made in error by a banking entity in the course of conducting a permitted or excluded activity activity is or a subsequent transaction to correct such an error. proprietary trading within the scope of the MATCHED, CUSTOMER-DRIVEN DERIVATIVE TRANSACTIONS Volcker Rule. Go Made by the banking entity contemporaneously with also entering into a customer-driven swap to Step 2. or security-based swap and a matched swap or security-based swap if: • The banking entity retains no more than minimal price risk; and • The banking entity is not a registered broker-dealer, swap dealer or security-based swap dealer.

HEDGES OF MORTGAGE SERVICING RIGHTS OR ASSETS Used by the banking entity to hedge mortgage servicing rights or mortgage servicing assets in NO TO ALL accordance with a documented hedging strategy. QUESTIONS

NON-TRADING ASSETS OR LIABILITIES Is the purchase or sale of a financial instrument that does not meet the definition of trading asset or trading liability under the applicable reporting form for the banking entity as of January 1, 2020.

Is the activity market making- REASONABLY EXPECTED NEAR TERM DEMANDS OF CLIENTS, CUSTOMERS OR COUNTERPARTIES related? Is the trading desk’s market making-related activities designed not to exceed, on an ongoing basis, the Are the compensation reasonably expected near term demands (RENTD) of Is the banking entity arrangements of clients, customers or counterparties?** licensed or registered persons performing the to engage in market- market making-related YES YES DOES THE RELEVANT TRADING DESK* ROUTINELY STAND A trading desk is presumed to be in compliance with this making activity in activities designed not READY, AND IS IT WILLING AND AVAILABLE? RENTD requirement if it establishes, implements, accordance with to reward or incentivize maintains and enforces internal limits that are designed applicable law? prohibited proprietary not to exceed the RENTD of clients, customers or trading? Routinely stand ready counterparties, as discussed in slide 9. Does the trading desk that establishes and NO NO manages the financial exposure routinely stand ready to purchase and sell financial instruments related to its financial exposure? Market making-related hedging conducted or directed by the same market-making trading desk does not need ACTIVITY IS NOT A PERMITTED MARKET Financial exposure means the aggregate risks of to separately comply with the risk-mitigating hedging MAKING-RELATED ACTIVITY one or more financial instruments and any YES TO permitted activity. Instead, market making-related associated loans, commodities, or foreign BOTH hedging may be addressed by the market-making exchange or currency, held by a banking entity or compliance program and controls. its affiliate and managed by a particular trading desk as part of the trading desk’s market making- related activities.

AND

Willing and available

Is the trading desk willing and available to quote, purchase and sell, or otherwise enter into long NO NO and short positions in those types of financial YES instruments for its own account in commercially reasonable amounts and throughout market cycles on a basis appropriate for the liquidity, Significant or Moderate TAL Banking Entity: maturity and depth of the market for the relevant has the banking entity established, and does it implement, types of financial instruments? maintain, and enforce, an internal compliance program YES NO that is reasonably designed to ensure compliance (including specific market making compliance Activity may be a program requirements for permitted NO TO Significant TAL Banking Entities)? underwriting EITHER ACTIVITY IS NOT A PERMITTED MARKET Metrics required for a activity. Go to Step MAKING-RELATED ACTIVITY Significant TAL Banking 3. Entity * See slide 10 for further details.

** See slide 9 for further details. VOLCKER RULE 2.0 – PROP © 2020 Davis Polk & Wardwell LLP. All rights reserved. This presentation is not a full analysis of the matters presented and should not be relied upon as legal advice. volckerrule.com 7 Step 2A-2: Permitted Activities: Underwriting

Is the banking entity acting as an underwriter for a distribution of securities and is the Are the amount and type of the securities in the underwriting position of the trading desk* trading desk’s underwriting position designed not Are the compensation related to this distribution? YES to exceed the RENTD of clients, customers or arrangements of persons counterparties***, taking into account the liquidity, performing the underwriting Underwriter maturity and depth of the market for the relevant activities designed not to reward types of securities? or incentivize prohibited Is the activity • A person who has agreed with an proprietary trading? underwriting? issuer** or selling security holder to A trading desk is presumed to be in compliance purchase securities, engage in a with this RENTD requirement if it establishes, distribution of securities, or manage a implements, maintains and enforces internal limits distribution of securities on behalf of the that are designed not to exceed the RENTD of issuer/selling security holder. clients, customers or counterparties, as discussed • A person who participates or agrees to in slide 9. participate in a distribution for or on YES behalf of the issuer/selling security holder. YES NO Distribution Is the banking entity • An offering of securities, whether or not Are reasonable efforts made to sell or licensed or registered to subject to registration under the otherwise reduce the underwriting NO engage in the underwriting Securities Act of 1933, that is position within a reasonable period, activities in accordance with distinguished from ordinary trading taking into account the liquidity, maturity YES applicable law? transactions by the presence of special and depth of the market for the relevant selling efforts and selling methods, or types of securities? • An offering of securities made pursuant to an effective registration statement under NO YES the Securities Act of 1933. NO

ACTIVITY IS NOT A PERMITTED Underwriting position UNDERWRITING ACTIVITY The long or short positions in one or more securities held by a banking entity or its affiliate, and managed by a particular trading desk, in connection with a particular distribution of securities for which such banking entity or affiliate is acting as an NO underwriter. Significant or Moderate TAL Banking Entity: Activity may be a has the banking entity established, and does it permitted implement, maintain, and enforce, an internal YES underwriting compliance program that is reasonably designed to * See slide 10 for further details. activity. Go to Step ensure compliance (including specific market making 3. compliance program requirements for Significant TAL Banking Entities)? ** Issuer is defined as in Section 2(a)(4) of the Securities Act of 1933. Metrics required for a *** See slide 9 for further details. Significant TAL Banking Entity

VOLCKER RULE 2.0 – PROP © 2020 Davis Polk & Wardwell LLP. All rights reserved. This presentation is not a full analysis of the matters presented and should not be relied upon as legal advice. volckerrule.com 8 Step 2A-3: Permitted Activities: Market Making and Underwriting Key Terms and Concepts For the market making-related permitted activity, client, customer or counterparty refers to market participants that make use of the banking entity’s market making-related services by obtaining such services, responding to quotations, or entering into a continuing relationship with respect to such services.

A trading desk may engage in interdealer trading to meet the RENTD of its clients, customers or counterparties, including current demand, unwind or sell positions acquired from clients, customers or counterparties, or engage in risk-mitigating or inventory management transactions. However, a trading desk or other organizational unit of another banking entity is not a client, customer or counterparty of the trading desk if that other entity has trading assets and liabilities of $50 billion or more, unless: INTERDEALER TRADING CLIENT, CUSTOMER • the trading desk documents how and why a particular trading desk or other organizational unit of the entity should be treated as a client, customer, OR COUNTERPARTY or counterparty of the trading desk for purposes of market making-related permitted activity; or • the purchase or sale by the trading desk is conducted anonymously on an exchange or similar trading facility that permits trading on behalf of a broad range of market participants.

Banking entities are not permitted to treat affiliated trading desks as clients, customers or counterparties, but certain transactions between affiliated trading desks may still be permitted as market making-related permitted activity if they do not require the expansion of the trading desks’ market-making limits.

For the underwriting permitted activity, client, customer or counterparty refers to market participants that may transact with the banking entity in connection with a particular distribution for which the banking entity is acting as underwriter.

A market making trading desk is presumed to comply with the requirement that its market-making related activities are designed not to exceed, on an ongoing basis, RENTD if it establishes, implements, maintains and enforces internal limits that are designed not to exceed RENTD, based on the nature and amount of the trading desk’s market-making related activities, on the:

• amount, types and risks of its market-maker positions; • amount, types and risks of the products, instruments and exposures the trading desk may use for risk management purposes; • level of exposures to relevant risk factors arising from its financial exposure; and • period of time a financial instrument may be held.

An underwriting trading desk is presumed to comply with the requirement that its market-making related activities are designed not to exceed RENTD if it establishes, implements, maintains and enforces internal limits that are designed not to exceed RENTD, based on the nature and amount of the trading desk’s underwriting activities, on the: PRESUMPTION • amount, types and risk of its underwriting position; OF COMPLIANCE • level of exposures to relevant risk factors arising from its underwriting position; and • period of time a security may be held.

Banking entities will be required to maintain records regarding any limit that is exceeded and any temporary or permanent increase to any limits and make those records available to Agencies upon request.

The presumption of compliance will continue to be available if an internal risk limit is exceeded or if the banking entity increases an internal risk limit if the banking entity takes action as promptly as possible after the breach to bring the trading desk into compliance and follows established written authorization procedures, including escalation procedures.

An Agency may rebut the presumption of compliance it determines, taking into account the liquidity, maturity, and depth of the market for the relevant types of financial instruments and based on all relevant facts and circumstances, that a trading desk is engaging in activity that is not based on the trading desk’s RENTD.

A unit of organization of a banking entity that purchases and sells financial instruments for the trading account of the banking entity or an affiliate that is:

• Structured by the banking entity to implement a well-defined business strategy; organized to ensure appropriate setting, monitoring and management review of the desk’s trading and hedging limits, current and potential future loss exposures and strategies; and characterized by a clearly-defined unit that typically:

• engages in coordinated trading activity with a unified approach to its key elements; RADING ESK T D • operates subject to a common and calibrated set of risk metrics, risk levels and joint trading limits; • submits compliance reports and other information as a unit for monitoring by management; and • books its trades together.

• Or, for a banking entity that calculates risk-based capital ratios under the U.S. market risk capital rule, or a consolidated affiliate for regulatory reporting purposes of a banking entity that calculates risk-based capital ratios under the U.S. market risk capital rule, established by the banking entity or its affiliate for purposes of market risk capital calculations under the U.S. market risk capital rule.

ACTIVITY IS NOT A PERMITTED RISK- NO MITIGATING HEDGING ACTIVITY Is the activity hedging? NO Significant or Moderate TAL Banking Entity: has the banking entity established, SIGNIFICANT TAL BANK ENTITIES and does it implement, maintain, and enforce, an internal compliance program that is At the inception of the hedge, does it not give rise reasonably designed to ensure compliance (including specific risk-mitigating hedging RELATIONSHIP TO RISKS to significant new or additional risk that is not itself hedged contemporaneously? compliance program requirements for Risk-mitigating hedging activities are YES TO ALL Significant TAL Banking Entities)? Certain metrics required for a Significant TAL permitted if conducted in connection with Is the purchase or sale subject to continuing review, Banking Entity. and related to individual or aggregated monitoring and management by the entity? positions, contracts or other holdings of the banking entity and if designed to reduce The review, monitoring and management must: the specific risks to the banking entity in connection with and related to such . Be consistent with written hedging policies YES positions, contracts or other holdings. and procedures as required by the final Is the hedging activity designed to reduce or regulations. otherwise significantly mitigate one or more . Be designed to reduce or otherwise SIGNIFICANT TAL BANKING ENTITIES: IS THE HEDGING ACTIVITY SUBJECT TO ADDITIONAL specific, identifiable risks arising in YES significantly mitigate specific, identifiable DOCUMENTATION REQUIREMENTS connection with and related to identified risks that develop over time from the positions, contracts or other holdings of the hedging activities undertaken in reliance Additional documentation is required for any purchase or sale of a financial instrument by banking entity, based upon the facts and on this permitted activity and the a Significant TAL Banking Entity made in reliance on this permitted activity if the circumstances of the identified underlying underlying positions, contracts and other purchase or sale: and hedging positions, contracts or other holdings of the banking entity, based upon holdings and the risks and liquidity of these the relevant facts and circumstances. . Is not established by the specific trading desk establishing or responsible for the positions? . Require ongoing recalibration of the underlying positions, contracts, or other holdings the risk of which the hedging hedging activity by the banking entity to activity is designed to reduce; The specific, identified risks may include, ensure that the hedging activity remains among others: . Is established by the specific trading desk establishing or responsible for the designed to reduce or otherwise underlying positions, contracts, or other holdings the risks of which the purchases or . Market risk significantly mitigate one or more specific, sales are designed to reduce, but is effected through a financial instrument, . Counterparty or credit risk identifiable risks and is not prohibited exposure, technique or strategy that is not specifically identified in the trading . Currency or foreign exchange risk proprietary trading. desk’s specific risk mitigating hedging policies and procedures; or . Interest rate risk . Is established to hedge aggregated positions across two or more trading desks; . Commodity price risk Are the compensation arrangements of persons performing the hedging activity designed not to reward . Basis risk Unless the hedging activities involve instruments on a pre-approved list and . Any similar risks or incentivize proprietary risk-taking? subject to pre-approved limits appropriate for the particular common hedging This requirement must be met both at the activity. OTHER BANKING ENTITIES inception of the hedging activity and when any adjustments are made. Is the hedging activity by the banking entity subject to YES NO ongoing recalibration to ensure that the hedging activity remains designed to reduce or otherwise Activity may be a significantly mitigate one or more specific, identifiable permitted risk- risks and is not prohibited proprietary trading? Additional documentation mitigating hedging required. activity. Go to Step 3.

Is the trading in permitted domestic government obligations?

Is the financial instrument an Is the financial instrument an obligation, participation or other Is the financial obligation of the FDIC, or any instrument of, or issued or instrument an entity formed by or on behalf of the ACTIVITY IS guaranteed by, an agency of the obligation of any FDIC for purpose of facilitating the NOT A Is the financial instrument United States, Ginnie Mae, Fannie State or any disposal of assets acquired or held PERMITTED an obligation of, or Mae, Freddie Mac, a Federal political by the FDIC in its corporate NO DOMESTIC NO issued or guaranteed by, Home Loan Bank, Farmer Mac or NO subdivision of a NO capacity or as conservator or GOVERNMENT the United States? a Farm Credit System institution State, including any receiver under the Federal OBLIGATIONS chartered under and subject to the municipal Deposit Insurance Act or its ACTIVITY provisions of the Farm Credit Act security? Dodd-Frank Act Orderly of 1971? Liquidation Authority?

YES YES YES YES

Significant or Moderate TAL Banking Entity: has the banking entity established, and does it implement, maintain, and enforce, an internal compliance program that is reasonably designed to ensure compliance? NO Certain metrics required for a Significant TAL Banking Entity.

YES

Activity may be a permitted domestic government obligations activity. Go to Step 3.

U.S. AFFILIATES OF Foreign Government Obligations FOREIGN BANKING ENTITIES (AND FOREIGN BANKING ENTITIES) NO YES

Is the financial instrument traded an Is the banking entity organized obligation of, or issued or under, or directly or indirectly Is the purchase or guaranteed by, the foreign sovereign Is the trading in controlled by, a banking entity that sale as principal under the laws of which the foreign permitted foreign is organized under the laws of a being made by an YES NO banking entity is organized (including NO foreign sovereign, and not directly insured government any multinational central bank of or indirectly controlled by a top- depository obligations? which the foreign sovereign is a tier banking entity organized under institution? member) or any agency or political the laws of the United States? subdivision of that foreign sovereign?

YES

Activity may be a permitted ACTIVITY IS foreign government Significant or Moderate TAL Banking Entity: NOT A has the banking entity established, PERMITTED obligations activity. NO Go to Step 3. YES and does it implement, maintain, and enforce, an FOREIGN internal compliance program that is reasonably GOVERNMENT designed to ensure compliance? OBLIGATIONS ACTIVITY

FOREIGN AFFILIATES OF Certain metrics required for a Significant TAL A U.S. BANKING ENTITY Banking Entity. (BUT NOT FOREIGN BRANCHES OF U.S. YES BANKING ENTITIES) Is the banking entity Is the banking entity a Is the banking entity purchasing or a foreign entity foreign bank, as selling a financial instrument that is an Is the financial instrument owned or defined in the Federal obligation of, or issued or owned by the foreign Is the trading in controlled by a Reserve Board’s guaranteed by, the foreign sovereign entity and not financed banking entity Regulation K, or under whose laws the foreign bank is permitted foreign YES YES YES by an affiliate that is organized or regulated as a organized (including any multinational located in the United NO government established under securities dealer by central bank of which the foreign States or organized obligations? the laws of the the foreign sovereign sovereign is a member) or any agency under the laws of the United States or any under whose laws the or political subdivision of that foreign United States or any State? entity is organized? sovereign? State? NO NO NO

Is the purchase or sale a permitted activity on behalf of customers?

FIDUCIARY CAPACITY OR Does the banking entity’s purchase or sale of financial instruments meet the RISKLESS PRINCIPAL following requirements: Significant or Moderate TAL Banking Is the banking entity acting as riskless . The banking entity is acting as Entity: has the banking entity established, principal in a transaction in which the trustee, or in a similar fiduciary YES TO ALL and does it implement, maintain, and enforce, an YES banking entity, after receiving an order capacity for a customer; internal compliance program that is reasonably to purchase or sell a financial instrument . The transaction is conducted for the designed to ensure compliance? from a customer, purchases or sells the account of, or on behalf of, a financial instrument for its own account to customer; and offset a contemporaneous purchase or . The banking entity does not have sale to or from the customer? or retain beneficial ownership of Metrics not the financial instruments. required.

YES

NO TO ANY NO

Activity may be a NO permitted activity on ACTIVITY IS NOT A PERMITTED behalf of customers. ACTIVITY IS NOT A PERMITTED ACTIVITY ON BEHALF OF Go to Step 3. ACTIVITY ON BEHALF OF CUSTOMERS CUSTOMERS

Is the activity permitted by or for a regulated insurance company?

Is the purchase or sale Have the appropriate federal banking Is the insurance company or conducted in compliance agencies, after consultation with the affiliate purchasing or selling with, and subject to, the Financial Stability Oversight Council and Is the banking entity an financial instruments solely applicable insurance company the relevant insurance commissioner, insurance company, or an YES for the general account of the YES investment laws, regulations YES jointly determined that a particular affiliate of an insurance insurance company or a and written guidance of the insurance legal requirement is insufficient company? separate account established State or jurisdiction in which to protect the safety and soundness of the by the insurance company? the insurance company is banking entity or the financial stability of domiciled? the United States?

NO NO NO YES NO

Activity may be a permitted activity Significant or Moderate TAL by a regulated Banking Entity: insurance has the banking entity established, company. Go to YES and does it implement, maintain, Step 3. and enforce, an internal compliance program that is reasonably designed to ensure compliance? ACTIVITY IS NOT A PERMITTED ACTIVITY BY A REGULATED INSURANCE COMPANY NO Metrics not required.

VOLCKER RULE 2.0 – PROP © 2020 Davis Polk & Wardwell LLP. All rights reserved. This presentation is not a full analysis of the matters presented and should not be relied upon as legal advice. volckerrule.com 15 Step 2G: Permitted Activities: Trading Activities of Foreign Banking Entities Outside the United States Is the activity U.S. INVOLVEMENT OF THE FOREIGN BANKING ENTITY permitted for foreign banking Is the banking entity purchasing or selling as principal entities? (including relevant personnel) located in the United States?

. A U.S. branch, agency or subsidiary of a foreign banking entity is considered to be located in the United States. CHARACTERISTICS OF . However, the foreign bank that operates or controls THE FOREIGN BANKING ENTITY YES such a branch, agency or subsidiary is not considered to be located in the United States Is the entity organized, or directly or indirectly solely by virtue of operating or controlling the U.S. controlled by a banking entity that is organized, under branch, agency or subsidiary. the laws of the United States or of any State? YES NO NO

DECISION-MAKING PERSONNEL Metrics not YES FOREIGN BANKING ORGANIZATIONS (FBOS) Are relevant personnel who make the decision to required. purchase or sell as principal for the banking entity YES For a banking entity that is an FBO for purposes of located in the United States? the Federal Reserve Board’s Regulation K, does the entity meet the qualifying foreign banking organization requirements of Regulation K? NO Significant or Moderate TAL Banking Entity: has the banking entity established, TRANSACTION ACCOUNTING and does it implement, maintain OTHER FOREIGN ORGANIZATIONS NO and enforce, an internal Is the purchase or sale, including any transaction arising compliance program that is For a banking entity that is not an FBO for purposes from risk-mitigating hedging related to the instruments reasonably designed to ensure of Regulation K, does the entity meet at least two of purchased or sold, accounted for as principal directly compliance? the following three requirements? NO or on a consolidated basis by any branch or affiliate that is located in the United States or organized under . Total assets held outside the United States United States or State laws? exceed total assets held in the United States. . Total revenues derived from business outside the United States exceed total revenues derived from business in the United States. YES . Total net income derived from business outside the United States exceeds total net ACTIVITY IS NOT A Activity may be a income derived from business in the United PERMITTED FOREIGN permitted foreign banking YES States. BANK ACTIVITY activity. Go to Step 3.

Is the activity permitted by a Activity may be a qualifying foreign ACTIVITY IS NOT A PERMITTED permitted qualifying excluded fund? ACTIVITY BY A QUALIFYING FOREIGN foreign excluded fund EXCLUDED FUND activity. Go to Step 3.

Is the banking entity with which the entity Is the entity organized or established YES outside the U.S.? has a relationship not organized in the U.S. or directly or indirectly controlled by a banking entity organized in the U.S.? YES and NO Does that banking entity’s ownership Are the ownership interests offered and interest or sponsorship of the entity meet sold solely outside the U.S.? NO For a Significant or Moderate the requirements for permitted covered TAL Banking Entity that fund activities and investments solely sponsors or controls a outside the U.S. under the Volcker Rule YES Qualifying Foreign Excluded NO covered fund provisions? Fund*: has the banking entity SEE DAVIS POLK COVERED FUNDS established, Would the entity be a covered fund if it FLOWCHARTS, SLIDE 39 FOR THE and does it implement, maintain were organized or established in the U.S.? REQUIREMENTS OF SOLELY OUTSIDE THE and enforce, an internal U.S. compliance program that is -or- reasonably designed to ensure compliance? Is the entity, or does it hold itself out as being, an entity that raises money from YES Metrics not investors primarily for the purpose of required. investing in financial instruments for resale or other disposition or otherwise trading in financial instruments? NO Is the entity established as part of a bona NO fide asset management business? *A qualifying foreign YES excluded fund is not itself YES subject to the Volcker Rule compliance program Would the entity not otherwise be a YES requirements that are banking entity except by virtue of a otherwise applicable to a relationship with another banking entity banking entity (whether ownership, sponsorship, or other relationship)? Is the entity not operated in a manner that NO enables the banking entity that sponsors or YES controls it, or any of its affiliates, to evade the requirements of the Volcker Rule?

Does either one of the following remedial measures apply?

EXCEPTION 1 EXCEPTION 2 TIMELY AND EFFECTIVE DISCLOSURE INFORMATION BARRIERS Would the MATERIAL CONFLICTS OF INTEREST activity Before effecting the specific transaction or Has the banking entity established, Would the transaction, class of transactions, or activity involve class or type of transactions, or engaging in maintained and enforced information otherwise be or result in the banking entity’s interests being materially YES the specific activity, has the banking entity: barriers that are memorialized in written precluded? adverse to the interests of its client, customer, or counterparty policies and procedures, such as with respect to such transaction, class of transactions or . Made clear, timely and effective physical separation of personnel, or activity? disclosure of the conflict of interest, functions, or limitations on types of together with other necessary activity, that are reasonably designed, information, in reasonable detail and in taking into consideration the nature of a manner sufficient to permit a NO the banking entity’s business, to prevent NO reasonable client, customer or the conflict of interest from involving or counterparty to meaningfully resulting in a materially adverse effect understand the conflict of interest; and on a client, customer or counterparty? MATERIAL HIGH-RISK EXPOSURES . Made such disclosure in a manner that provides the client, customer or The banking entity may not rely on Would the transaction, classMATERIAL of transactions HIGH-RISK or EactivityXPOSURES result, directly or indirectly, in counterparty the opportunity to negate, information barriers if it knows or a material exposure by the covered banking entity to a high-risk asset or a high- or substantially mitigate, any materially reasonably should know that Would the transaction, class ofrisk transactions trading strategy or activity? result, directly or indirectly, in adverse effect on such party created by notwithstanding, the conflict of interest a material exposure by the covered banking entity to a high-risk asset or a high- the conflict of interest? may involve or result in a materially risk trading strategy? adverse effect on a client, customer, or High-risk asset means an asset or group of related assets that would, if held counterparty. by a banking entity, significantly increase the likelihood that the banking entity would incur a substantial financial loss or would pose a threat to the financial stability of the United States. . High-risk trading strategy means a trading strategy that would, if engaged in YES YES NO by a banking entity, significantlyNO increase the likelihood that the banking entity High-risk would incur trading a substantial strategy meansfinancial a losstrading or wouldstrategy pose that a would,threat toif engagedthe financial in by stabilitya banking of entity,the United significantly States. increase the likelihood that the banking entity would incur a substantial financial loss or would pose a threat to the financial YES stability of the United States.

THREAT TO SAFETY AND SOUNDNESS ACTIVITY IS PROHIBITED PROPRIETARY YES TRADING EVEN IF IT WOULD OTHERWISE Would the transaction, class of transactions or activity pose a threat to the safety QUALIFY AS A PERMITTED ACTIVITY and soundness of the banking entity or the financial stability of the United States?

ACTIVITY IS PERMITTED

The Volcker Rule includes compliance program requirements that vary depending upon whether a banking entity (together with its affiliates) is a Significant TAL Banking Entity, a Moderate TAL Banking Entity or a Limited TAL Banking Entity.

Significant TAL Banking Entities are also subject to metrics reporting requirements. This section of the document outlines the Volcker Rule’s most important compliance-related provisions, with a focus on those applicable to Significant TAL Banking Entities.

THE 3 TIERS 20

TIERED COMPLIANCE PROGRAM 21

SIX PILLAR COMPLIANCE PROGRAM 22

SUMMARY OF PROPRIETARY TRADING METRICS 23

PERMITTED ACTIVITY-SPECIFIC COMPLIANCE PROGRAM ELEMENTS 25

DAVIS POLK CONTACTS 26

Based on the four-quarter rolling average of the consolidated gross TAL of the banking entity, its affiliates and its subsidiaries, what is the banking entity’s applicable compliance tier?

Moderate TAL Banking Significant TAL Banking Entity Limited TAL Banking Entity Entity TAL = at least $1 billion but TAL = less than $1 billion TAL = $20 billion or more less than $20 billion

Consolidated gross TAL of the banking Obligations of, or guaranteed by, the United entity, its affiliates and its subsidiaries States federal government or any agency of the United States (e.g., GSEs). For a given quarter, Trading Assets and minus For an FBO or a subsidiary of an FBO, Liabilities (TAL) = Do not subtract obligations of U.S. state or trading assets and liabilities are measured local government entities, including based on the combined U.S. operations of municipal securities. the top-tier FBO.

For additional detail on compliance requirements for each tier, see next slide.

SIGNIFICANT TAL BANKING ENTITIES MODERATE TAL BANKING ENTITIES LIMITED TAL BANKING ENTITIES

Significant TAL Banking Entities are Moderate TAL Banking Entities may satisfy Limited TAL Banking Entities do not have subject to six-pillar, Volcker-specific their Volcker Rule compliance program an ongoing obligation to demonstrate compliance program requirements, obligations by including in their existing compliance with the Volcker Rule. including a CEO attestation requirement compliance policies and procedures and metrics reporting requirements. appropriate references to the requirements Instead, Limited TAL Banking Entities are of Section 13 of the BHC Act, and the presumed to be compliant with the Volcker Rule regulations, with adjustments Volcker Rule unless the Agencies rebut as appropriate depending upon their the presumption of compliance by activities, size, scope and complexity. determining through examination or audit that the banking entity has engaged in No CEO attestation or metrics activities that are otherwise prohibited by requirements apply. the Volcker Rule.

The Agencies may rebut the presumption of compliance only in accordance with prescribed notice and response procedures.

If the presumption of compliance is rebutted, the Agencies may require the banking entity to be treated as either a Moderate TAL Banking Entity or a Significant TAL Banking Entity.

COMPLIANCE PROGRAMS FOR SIGNIFICANT TAL BANKING ENTITIES MUST, AT A MINIMUM, INCLUDE:

INTERNAL POLICIES AND PROCEDURES Written policies and procedures reasonably designed to document, describe, monitor and limit exempted trading activities conducted by the banking entity (including setting, monitoring and managing limits required under the market making-related, underwriting CEO ATTESTATION and risk-mitigating hedging permitted activities) to ensure that all activities comply with the Volcker Rule. The CEO of a Significant TAL Banking Entity must, no later than March 31 of each year, attest in writing that the banking INTERNAL CONTROLS entity has in place processes to establish, maintain, enforce, review, test and modify the six-pillar compliance program in a A system of internal controls reasonably designed to monitor compliance and to manner reasonably designed to achieve prevent the occurrence of activities that are prohibited by the Volcker Rule. compliance with Section 13 of the BHC Act and the Volcker Rule regulations.

MANAGEMENT FRAMEWORK—RESPONSIBILITY AND For banking entities that are U.S. branches ACCOUNTABILITY or agencies of foreign banking entities, the A management framework that clearly delineates responsibility and accountability attestation may be provided by the senior for compliance with the Volcker Rule and that includes appropriate management review of management officer of the U.S. operations trading limits, strategies, hedging activities, investments, incentive compensation and other the foreign banking entity who is located in matters identified in the Volcker Rule or by management as requiring attention. the United States.

INDEPENDENT TESTING

Independent testing and audit of the effectiveness of the compliance program conducted periodically by qualified personnel of the banking entity or by a qualified outside party.

The terms, scope and detail of the compliance TRAINING program must be appropriate for the types, size, scope and Training for trading personnel and managers, as well as other appropriate personnel, complexity of the to effectively implement and enforce the compliance program. activities and business structure of the banking entity. RECORDKEEPING Records sufficient to demonstrate compliance with the Volcker Rule, which a banking entity must promptly provide to Agencies upon request and retain for a period of no fewer than 5 years or such longer period as required by Agencies. This must include the specified records required to be maintained in connection with the additional document requests for risk-mitigating hedging permitted activity, as applicable.

VOLCKER RULE 2.0 – PROP © 2020 Davis Polk & Wardwell LLP. All rights reserved. This presentation is not a full analysis of the matters presented and should not be relied upon as legal advice. volckerrule.com 22 Summary of Proprietary Trading Metrics for Significant TAL Banking Entities METRICS .Internal Limits and Usage These metrics must be reported for all desks engaged in underwriting, market making-related, risk- .Value at Risk (VaR) Risk Management mitigating hedging and U.S./foreign government obligation permitted activities (covered trading activities)

Source of Revenue .Comprehensive Profit and These metrics must be reported for all desks Loss Attribution engaged in covered trading activities .Positions These metrics must be reported for all desks that rely Customer-Facing on the underwriting and market making-related .Transactions Activity permitted activities to conduct underwriting or market making-related activity, respectively

KEY PROCEDURES AND LOGISTICS .Reporting Required: Metrics in respect of covered trading activities or a subset of covered trading activities, as explained above Certain Reporting .Reporting Optional: Metrics in respect of trading conducted pursuant to an exclusion Remains Optional from the scope of proprietary trading, or pursuant to the on behalf of customers, regulated insurance company or foreign bank permitted activities

Level of Measurement .Each trading desk, as defined in Step 2A-3. This may span across legal entities

Measurement .Daily Frequency .Within 30 days of each quarter end in accordance with the XML Schema specified and Reported Frequency published on the Agency’s website and Method

.Five years Record Retention

.Provide identifying information about each trading desk and the desk’s associated metrics, including: name, identifier, identification of each type of covered trading Trading Desk activity in which the desk is engaged, a description of the desk’s general trading Information strategy, and a list identifying each Agency receiving the submission of the trading desk.

.Provide descriptive information about the desk’s reported quantitative metrics, including: (1) an Internal Limits Information Schedule naming and describing each limit and identifying the corresponding risk factor attribution if the limit type is a limit on a Level of Measurement risk factor sensitivity and profit and loss attribution to the same risk factor is reported; and (2) a Risk Factor Attribution Information Schedule providing identifying and descriptive information for each risk factor attribution reported pursuant to the Comprehensive Profit and Loss Attribution metric.

.A banking entity may, but is not required to, provide as part of its quarterly reporting a Narrative Statement narrative statement discussing any information the banking entity views as relevant for assessing the information it has reported.

.Five years Record Retention

COMPLIANCE PROGRAMS FOR SIGNIFICANT TAL BANKING ENTITIES MUST ADDRESS ELEMENTS SPECIFIC TO A BANKING ENTITY’S MARKET MAKING-RELATED, UNDERWRITING AND RISK-MITIGATING HEDGING PERMITTED ACTIVITIES.

MARKET MAKING-RELATED RISK-MITIGATING HEDGING RISK-MITIGATING HEDGING – ADDITIONAL DOCUMENTATION REQUIREMENTS For its market making-related activities, a Significant TAL For its risk-mitigating hedging activities, a Significant TAL Banking Entity’s compliance program must address: Banking Entity’s compliance program must include: Additional documentation is required for any purchase or sale of a financial instrument by a Significant TAL Banking Entity made in The financial instruments the trading desk stands ready to Reasonably designed written policies and reliance on this permitted activity if the purchase or sale: purchase and sell. procedures regarding the positions, techniques and strategies that may be used for hedging, including . Is not established by the specific trading desk establishing Risk management elements: documentation indicating what positions, contracts or or responsible for the underlying positions, contracts, or other • the actions the trading desk will take to demonstrably other holdings a particular trading desk may use, and holdings the risk of which the hedging activity is designed to reduce or otherwise significantly mitigate promptly the position and aging limits with respect to such positions, reduce; risks of its financial exposure (consistent with the limits contracts or other holdings. . Is established by the specific trading desk establishing or set in the desk); responsible for the underlying positions, contracts, or other • the products, instruments, and exposures each Internal controls and ongoing monitoring, management, holdings the risks of which the purchases or sales are designed trading desk may use for risk management purposes; and authorization and escalation procedures. to reduce, but is effected through a financial instrument, • the techniques and strategies each trading desk may exposure, technique or strategy that is not specifically use to manage the risks of the activities and positions; Analysis and independent testing designed to ensure identified in the trading desk’s specific risk mitigating hedging and that the positions, techniques and strategies that may be policies and procedures; or • the process, strategies, and personnel responsible used for hedging may be reasonably expected to reduce . Is established to hedge aggregated positions across two or for ensuring that the actions taken to mitigate these or otherwise significantly mitigate the specific, identifiable more trading desks; risks are and continue to be effective. risk(s) being hedged. Unless the hedging activities are in instruments on a pre- Limits for the trading desk in accordance with the market approved list and subject to pre-approved limits appropriate for making-related presumption of compliance described on the particular common hedging activity. Step 2A-3.

Written authorization procedures, including escalation UNDERWRITING procedures that require review and approval of any trade that would exceed the trading desk’s limits, demonstrable For its underwriting activities, a banking entity’s compliance program must address: analysis that the basis for any temporary or permanent increase to the trading desk’s limits, and independent review The products, instruments or exposures each trading desk may purchase, sell, or manage as part of its underwriting of such demonstrable analysis and approval. A significant activities. TAL Banking Entity may comply with the written authorization procedures requirement by complying with the market Limits for each trading desk, in accordance with the underwriting presumption of compliance described in Step 2A-3. making-related presumption of compliance described in Step 2A-3. Written authorization procedures, including escalation procedures that require review and approval of any trade that would exceed a trading desk’s limits, demonstrable analysis of the basis for any temporary or permanent increase to a trading desk’s Internal controls and ongoing monitoring and analysis of limits, and independent review of such demonstrable analysis and approval. A Significant TAL Banking Entity may comply with the trading desk’s compliance with its limits. the written authorization procedures requirement by complying with the underwriting presumption of compliance described on Step 2A-3.

Internal controls and ongoing monitoring and analysis of each trading desk’s compliance with its limits.

VOLCKER RULE 2.0 – PROP © 2020 Davis Polk & Wardwell LLP. All rights reserved. This presentation is not a full analysis of the matters presented and should not be relied upon as legal advice. volckerrule.com 25 Questions? If you have any questions regarding the matters covered in this publication, please contact any of the lawyers listed below or your regular Davis Polk contact.

John Banes 212 450 4116 [email protected]

Luigi L. De Ghenghi 212 450 4296 [email protected]

Randall D. Guynn 212 450 4239 [email protected]

Jai R. Massari 202 962 7062 [email protected]

Annette L. Nazareth 202 962 7075 [email protected]

Gabriel D. Rosenberg 212 450 4537 [email protected]

Margaret E. Tahyar 212 450 4379 [email protected]

Christopher M. Paridon 202 962 7135 [email protected]

Ryan Johansen 212 450 3408 [email protected]

Craig D. Kennedy 212 450 3231 [email protected]